A borrowing spree by Thai billionaire Dhanin Chearavanont that raised debt to almost six times equity is adding to mounting corporate liabilities and reviving memories of the 1997 Asian crisis.

Dhanin’s CP All Pcl (CPALL), operator of 7-Eleven stores, has increased total debt to 5.8 times equity as of Sept. 30 from zero two years ago, data compiled by Bloomberg show. The number of Thai companies with debt more than double equity has risen to 53 out of 620 from 42 in 2007.

Standard & Poor’s says that, while a crisis isn’t imminent, overstretched Thai borrowers have become more susceptible to downturns as global economic growth falters. The region has also protected itself by developing local debt markets since Southeast Asian banks and property developers struggled to meet overseas borrowings in the 1997 crisis.

“We believe Thai companies haven’t been tested under very stressed conditions, especially with their current higher debt load,” said Xavier Jean, a Singapore-based analyst at S&P. “We haven’t seen the full impact of rising interest rates and the macroeconomic headwinds in the region and China.”

Crisis lessons

CP All declined to comment when asked about its debt levels, according to an e-mailed reply from the corporate communications division. There was no immediate reply to further requests for comment.

Dhanin said in a media interview last month that he is interested in buying Thai lender LH Bank if it is put up for sale, according to a Nov. 25 report in the Bangkok Post.

“One has to wonder whether the CP Group remembers the lessons of the Asian crisis,” said Gillem Tulloch, founder of Hong Kong-based GMT Research Ltd. Tulloch has worked in Asia as a financial analyst since 1995. “There seems to be a fondness for large debt-financed acquisitions outside of their core competency.”

CP All sold 80 billion baht ($2.4 billion) of bonds this year, up 60 percent from 2013, Bloomberg-compiled data show.

Charoen Pokphand Foods Pcl, in which the Dhanin family is also the biggest shareholder, raised $290.4 million from the sale of convertible bonds in January 2014. The notes have dropped 6.2 cents on the dollar this half to 100.02, Bloomberg-compiled prices show. The securities are exchangeable into shares of CP All, which have slid 13.5 percent in the same period.

Slowing economy

The Bank of Thailand has kept its benchmark rate at 2 percent since March, as economic growth is set to slow to 0.8 percent in 2014 from 2.9 percent last year, according to economists surveyed by Bloomberg.

The 10-year government bond yield has declined 102 basis points this year 2.88 percent.

CP All generated 9.3 billion baht in free cash flow in 2013, and has averaged 9.9 billion baht annually since 2008, according to company filings. It had 188 billion baht of total debt as of Sept. 30.

“We are quite comfortable given the company’s ability to generate cash flow,” said Jessada Sookdhis, chief investment officer in Bangkok at CIMB-Principal Asset Management Co., which owns CP All bonds. “From our analysis, the gearing ratio will gradually decrease in the next three to five years.”

While the company has a cushion if they need to sell some assets, “they won’t be able to take on a lot more debt going forward, without breaching their debt covenants,” said Sarat Arunakul, an assistant fixed-income manager in Bangkok at Kasikorn Asset Management Co., which manages 1.08 trillion baht including CP All bonds. “We think their expansion plans are rather aggressive and the market is justified with its concern.”